Reading Notes: How to Understand Brands (1)

In consumer goods investment, understanding brand is an important topic. The role of a brand can be simplified and divided into two functions: search cost and premium effect, as shown in the following diagram.

From an investment perspective, most brands do not exist in an absolute extreme, but rather in a hybrid state. This study, as an internal sharing within BEDROCK, focuses primarily on the latter - brands that are dominated by premium effect and are more similar to luxury goods logic. The aim is to use a sociological and communicational perspective to understand the sociological essence and significance of brands.

The entire article consists of three parts: how to understand consumerism, how to understand communication media, and how to understand luxury brands.

Here is a list of reference books, with the bolded ones being the recommended readings:

"The High Growth Handbook" by Elad Gil

"The Consumer Society" by Jean Baudrillard

"The Society of the Spectacle" by Guy Debord

"The Tipping Point" by Malcolm Gladwell

"Amusing Ourselves to Death" by Neil Postman

"The Disappearance of Childhood" by Neil Postman

"Technopoly" by Neil Postman

"Understanding Media: The Extensions of Man" by Marshall McLuhan

"The Crowd: A Study of the Popular Mind" by Gustave Le Bon

"Luxury Strategy" by Vincent Bastien & Jean-Noel Kapferer

"Crossing the Chasm" by Geoffrey A. Moore

"Inside the Tornado" by Geoffrey A. Moore.

Part 1. How to Understand Consumerism?

Drawing on Jean Baudrillard's "The Consumer Society," this section aims to understand the consumer landscape, which is characterized by the facade of consumption and the fundamental changes in social production and relationships since the advent of capitalism.

Core Ideas in "The Consumer Society":

To begin with, it is important to note that Baudrillard's definition of "consumer society" is not the same as what we commonly refer to today as "consumerism," the economic concept of "consumption," or any singular or specific "consumer goods/brands." Baudrillard described a system of symbolization, symbolizing and power shifts from a sociological perspective, arising from the fluctuation of production and social relationships, which he referred to as the "consumer society."

While the concept may be difficult to grasp, it is highly insightful. Here is a simplified breakdown:

• "Consumer society": A system of social power distribution and corresponding derived social relationships, built on the foundation of capital and commerce, symbolization, and signification as a means of influence, within a society that is productive and prosperous.

• "Consumerism": This is a means of realizing the "consumer society" within the framework of Baudrillard's conceptualization. The core idea of consumerism is to use "consumption" as a means of "self-realization." Examples of this approach include marketing strategies, such as those found on Xiaohongshu, Douyin, e-commerce live streaming, and WeChat soft articles. Based on the equation "consumption = self-realization," various forms of consumption goods advertising, consumption methods (such as social media communication), and value definitions (such as "looks economy") are integrated.

• "Consumption": In economics, "consumption" is a solution to demand. For instance, basic consumer goods (necessities) like grains and cooking oil satisfy survival needs, while luxury food and beauty products satisfy higher-order needs for self-expression and enjoyment (the top two levels of Maslow's hierarchy of needs).

• "Consumer goods" and "consumer brands": These are the basic units/atoms of "consumption" in economics and the "consumer society" in Baudrillard's sense. "Brand" has two meanings: it is a means of distinguishing consumer goods production (corresponding to the search cost in our model), and it is one of the symbolic units that constructs "consumerism" and the "consumer society." Further analysis is provided in the following sections.
  

Material Objects and the Worship of Objects: Understanding "Symbolization"

Baudrillard analyzes the meaning of "material objects":

• The relationship between consumption and production: In economics, consumption is a solution to "demand." However, in a society where productivity is abundant, the production system creates a mirror/tool for itself: a system of infinite demand updates. The essence of this mirror is a highly systematic cultural system, symbol system, coding system, communication system, moral system, time system, production material distribution system, and production relationship system, which is mainly expressed through "consumption." Consumption is a modern domestication of labor.

• "The Material Objects" in a Consumer Society: The first layer of meaning is "abundance." "Abundance" is a visual system, or rather a symbolic visual system that conveys a "sense of surplus." To understand the "sense of surplus," it can be combined with the "bandwidth theory" ("sense of surplus" vs "sense of deprivation"). After understanding the "sense of surplus," the second concept, "waste," is introduced. "Waste" cannot be understood solely in economic terms; it is an expression of power and a sense of surplus. To understand the power of "sense of surplus" and "waste" themselves, we can refer to American consumption behavior: highly wasteful behavior + habits of not saving even if poor. Based on these two concepts, the semiotic meaning of consumption is derived: individual consumption goods constitute individual symbols, and people express and "acquire" abstract concepts through these "symbols." For instance, happiness comes from the accumulation of symbols. A single symbol is a fragment of illusion, and the symbols of the entire system constitute a closed interpretive system.

• The vicious cycle of growth: High production → high consumption → high production. For instance, the "entropy increase" generated by high-intensity labor is eliminated by rapidly developing medical care, which is itself a result of the development of the production system. Similarly, the realization of "speed" is achieved at the expense of "sense of security," and the compensation for "sense of security" is achieved through "consumption behavior." Baudrillard believes that the ultimate result is that growth is manifested as a digital game; and the digital game is deified, imparting meaning to a series of cycles.
  

Consumer Theory: Consumption is a means of value system and power distribution.

• Surplus and fairness (total amount and distribution): Baudrillard calculated and studied social welfare, transfer payments, and so on since the development of capitalist society. His conclusion is that the progress of productivity has not significantly changed social inequality (transfer payments to the poor are synchronous and premised with the acceleration of wealth concentration of the rich). Baudrillard proposed that "growth in its own movement is built on this foundation of imbalance," which he calls the "functional meaning of the defect in the growth system."

• Capitalism's redistribution of power: "The progress of capitalism should not be viewed as objective social progress - that is, the gradual transformation of all concrete natural values into production forms, that is, the transformation into two sources: 1. Economic interests; 2. Social privileges." For example, the emergence of spatial rights is based on the fact that space can be distributed. This can be understood in combination with the description of capitalism in "Luxury Brand Strategy": traditional hierarchical power comes from "lineage" (originating from violence), while hierarchical power in capitalist society comes from the capital system (economic = power).

• System construction: Basis: based on individual psychological motivation.--> Cohesion: based on collective systematic value cognition.--> The ideal of consistency represented and realized by "objects."

• The Meaning Order of Consumption: "Consumption is an immediate, collective production function." It can be compared with traditional clan systems, which are trained based on certain morals, while consumption is trained through consumption behavior itself. The logic is that "consumption" itself is created by the "capitalist" value system to replace traditional Puritanical laws. In this vast system, a "gap" artificially created by people is that "today, the area where the individual is treated as an irreplaceable need is the area of the individual as a consumer," which is also one of the key points in understanding "brands."
  

How the Consumption System Appears at the “Individual” Level

Bourdieu discusses how the symbolic system of consumption "alienates" humans from various dimensions, and to help understand this theory, I have summarized it as follows:

• At the level of commodities, "uniqueness" can be mass-produced: Simply put, consumer goods are differentiated through classification and symbols to identify humans as different clusters, and then mass-produced to satisfy "diversity". The key mindset here is that the production system shapes the demand system in reverse.

• The consumption and its various systems constitute "diversity": Compared to traditional moral training, the variability and derivatives of consumption itself are very rich (consider how many sects existed in religious times). This kind of derivation can come from various aspects: the commodities themselves, the media themselves (which can be understood in combination with Neil Postman and Marshall McLuhan's media theory), competition itself, and even the body and the self.

Key Takeaways:

• The production system defines the demand system. According to Bourdieu, "the demand system is the product of the production system." He argues that "we know that demand is not related to the things themselves, it is not produced one by one, but emerges as a dominant force within a larger range of productive forces," and "demand and consumption are actually an organized extension of productive forces." "The truth of consumption is that it is not a pleasure function, but a production function - and therefore, like material production, it is not an individual function, but an immediate and comprehensive collective function." The relationship between people and consumer goods is not a one-to-one relationship between "people" and "things," but a relationship between people and the system itself, with consumption as a dominant tool. Bourdieu's entire book is an argument for this viewpoint.

• The consumerist society is a value system created by capitalism. The expression of this system is a series of behaviors with consumption as the carrier, and the most important thing to understand is that the only gap created for individuals in this society is "the domain where individuals as individuals, their uniqueness is respected, is the domain where they are consumers."

• As a system, the consumerist society is supported by a whole set of "power structures." Essentially, the problem of poverty and wealth brought about by the expansion of capitalism is unsolvable because, in this system, the logic of power acquisition is not based on blood (violence logic) or religion (cultural logic), but on capital logic/economic logic. However, not all participants in the production end can become predators, and investment purposes require recognizing the group of people on the production end that can become empires. This point requires further understanding of Bourdieu's theory in later sections.
  

To be continued. . .